Porta Systems Corp. Reports Results for the Quarter and Six Months Ended June 30, 2008

  
    
  
  
    
      Porta Systems Corp. (OTC.BB:PORT) today reported operating income for 
      the quarter ended June 30, 2008 of $192,000 compared to operating income 
      of $258,000 for the quarter ended June 30, 2007. The net loss for the 
      quarter ended June 30, 2008, was $408,000, $0.45 per share (basic and 
      diluted), compared to the net loss of $791,000, $0.87 per share (basic 
      and diluted), which included a loss from discontinued operations of 
      $487,000, $0.54 per share (basic and diluted) for the quarter ended June 
      30, 2007. As of June 30, 2007, the Company had completely discontinued 
      the operation of its OSS business and wrote off all remaining OSS assets 
      and incurred losses related to the discontinued OSS operations. There 
      was no loss from discontinued operations for the quarter ended June 30, 
      2008.
    
    
      The Company reported operating income for the six months ended June 30, 
      2008 of $263,000 compared to operating income of $924,000 for the six 
      months ended June 30, 2007. The Company recorded a net loss of $946,000, 
      $1.05 per share (basic and diluted) for the six months ended June 30, 
      2008, compared to the net loss of $626,000, $0.69 per share (basic and 
      diluted), which included a loss from discontinued operations of 
      $521,000, $0.57 per share (basic and diluted) for the six months ended 
      June 30, 2007. During the six months ended June 30, 2007, the Company 
      had completely discontinued the operation of its OSS business and wrote 
      off all remaining OSS assets and incurred losses related to the 
      discontinued OSS operation. There was no loss from discontinued 
      operations for the six months ended June 30, 2008.
    
    
      Sales were $6,677,000 for the quarter ended June 30, 2008 versus 
      $7,069,000 for the quarter ended June 30, 2007, a decrease of 
      approximately $392,000 (6%). Copper Connection/Protection sales were 
      $5,455,000 for the quarter ended June 30, 2008 versus $5,820,000 for the 
      quarter ended June 30, 2007, a decrease of $365,000 (6%). Substantially 
      all of the decrease in sales for the quarter is the result of a decline 
      in orders from British Telecommunications and its systems integrators 
      for connector products that was partially offset by increased sales of 
      protection modules to British Telecommunications. Signal Processing 
      sales for the quarter ended June 30, 2008 were $1,222,000 versus 
      $1,249,000 for the quarter ended June 30, 2007, a decrease of $27,000 
      (2%).
    
    
      Sales were $13,222,000 for the six months ended June 30, 2008 versus 
      $15,271,000 for the six months ended June 30, 2007, a decrease of 
      approximately $2,049,000 (13%). Copper Connection/Protection sales were 
      $10,847,000 for the six months ended June 30, 2008 versus $12,634,000 
      for the six months ended June 30, 2007, a decrease of $1,787,000 (14%). 
      Substantially all of the decrease in sales for the six months is the 
      result of a decline in orders from British Telecommunications and its 
      systems integrators for connector products that was partially offset by 
      increased sales of protection modules to British Telecommunications. 
      Signal Processing sales for the six months ended June 30, 2008 were 
      $2,375,000 versus $2,637,000 for the six months ended June 30, 2007, a 
      decrease of $262,000 (10%). The decline in Signal Processing revenue for 
      the six months was primarily due to our failure to receive orders from 
      the military sector due to the delay in Congress’ 
      failure to approve the U.S. military budget until late 2007.
    
    
      The overall gross margin from continuing operations was 28% for the 
      quarter ended June 30, 2008, compared to 30% for the quarter ended June 
      30, 2007. Gross margin for the six months ended June 30, 2008 was 28% 
      compared to 31% for the six months ended June 30, 2007. The decrease for 
      the quarter and six months is primarily related to excess capacity in 
      our Mexico facility due to lower production levels as compared to the 
      same quarter and six months of 2007, principally resulting from the 
      decrease in sales to British Telecommunications and its systems 
      integrators.
    
    
      Operating expenses for the quarter and six months ended June 30, 2008 
      decreased by $163,000 (9%) and $351,000 (9%), respectively, from the 
      same period in 2007. The decrease relates primarily to a decrease in 
      selling expenses due to a reduction in advertising expenses and a 
      decrease in general and administrative costs due to a reduction of costs 
      related to our debt restructuring.
    
    
      Interest expense, net of interest and other income, increased for the 
      three and six months ending June 30, 2008 from the same period in 2007 
      by $38,000 and $183,000, respectively, primarily related to interest on 
      our senior debt under the terms of our extension agreement with our 
      senior debt holder and an additional $1,600,000 loan from our senior 
      lender which was entered into after the second quarter of 2007. We do 
      not accrue interest on the entire amount of the senior debt of 
      approximately $24,973,000 under the terms of our agreement with the 
      holder of our senior debt.
    
    
      Our Copper Connection/Protection business unit operated profitably 
      during the quarter and six months ended June 30, 2008, with operating 
      income of $450,000 and $897,000, respectively. The Signal Processing 
      unit operated profitably during the quarter and six months ended June 
      30, 2008 with operating income of $262,000 and $503,000, respectively. 
      However, our consolidated operating income for the June 2008 quarter was 
      $192,000 and $263,000 for the six months ended June 30, 2008 after 
      deducting corporate overhead and other unallocated expenses of $520,000 
      and $1,137,000 respectively.
    
    
      On July 31, 2008, after overwhelming approval of stockholders, the 
      Company amended its certificate of incorporation to effect a 
      one-for-11.11 reverse split pursuant to which each share of common stock 
      was converted into 0.0900090009 share of common stock. The financial 
      statements give retroactive effect to the reverse split.
    
    
      The reverse split was a necessary condition for the implementation of 
      our debt restructuring plan which took place as of July 31, 2008. The 
      restructuring eliminated principal and interest of approximately 
      $24,859,000 of debt. As part of the restructuring, after giving effect 
      to the Reverse Split, the Company issued or reserved 8,546,449 shares of 
      the Company’s common stock to creditors as 
      partial consideration for their very substantial debt reduction. The 
      gain on the debt restructuring will be recorded in the third quarter and 
      is estimated at $17,000,000 net of related costs. In addition, key 
      members of Porta’s management team received an 
      aggregate of 603,277 shares of common stock. The Company notes that no 
      stock options have been granted to employees for many years. The reverse 
      split and debt restructuring are an important step in our effort to 
      improve our Company’s overall financial health.
    
    
      Porta Systems Corp. designs, manufactures, markets and supports 
      communication equipment used in telecommunications, video and data 
      networks worldwide.
    
    
      Statements in this press release may be “forward-looking 
      statements” within the meaning of the Private 
      Securities Litigation Reform Act of 1995. These statements are based on 
      current expectations, estimates and projections about the Company’s 
      business based, in part, on assumptions made by management. These 
      statements are not guarantees of future performance and involve risks, 
      uncertainties and assumptions that are difficult to predict. Therefore, 
      actual outcomes and results may, and probably will, differ materially 
      from what is expressed or forecasted in such forward-looking statements 
      due to numerous factors, including those described above and those risks 
      discussed from time to time in the Company’s 
      filings with the Securities and Exchange Commission filings, including 
      the Risk Factors included in the Form 10-K for the year ended December 
      31, 2007 and the Management’s Discussion and 
      Analysis of Financial Conditions and Results of Operations in the Form 
      10-K for the year ended December 31, 2007 and the Form 10-Q for the 
      quarter ended June 30, 2008. In addition, general industry and market 
      conditions and growth rates, and general economic conditions could 
      affect such statements. Any forward-looking statements speak only as of 
      the date on which they are made, and the Company does not undertake any 
      obligation to update any forward-looking statement to reflect events or 
      circumstances after the date of this release.
    
    
      
        
          
            -See Accompanying Table-
          
        
      
      
        
           
        
      
      
        
           
        
      
      
        
          
            Porta Systems Corp. and 
            Subsidiaries
          
        
      
      
        
          
            Condensed Consolidated Statement of OperationsQuarter and 
            Six Months ended June 30,(in thousands except per share 
            amounts)
          
        
      
      
        
           
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            Quarter ended June 30,
          
        
        
           
        
        
          
            Six Months ended June 30,
          
        
      
      
        
        
        
        
        
          2008
        
        
           
        
        
          2007
        
        
        
        
          2008
        
        
           
        
        
          2007
        
      
      
        
           
        
      
      
        
          Sales
        
        
        
        
          $
        
        
          6,677
        
        
           
        
        
        
        
          $
        
        
          7,069
        
        
           
        
        
        
        
          $
        
        
          13,222
        
        
           
        
        
        
        
          $
        
        
          15,271
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Gross profit
        
        
        
        
        
        
          1,846
        
        
        
        
        
        
        
        
          2,075
        
        
        
        
        
        
        
        
          3,683
        
        
        
        
        
        
        
        
          4,695
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Total operating expenses
        
        
        
        
           
        
        
          1,654
        
        
           
        
        
        
        
           
        
        
          1,817
        
        
           
        
        
        
        
           
        
        
          3,420
        
        
           
        
        
        
        
           
        
        
          3,771
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Operating income
        
        
        
        
        
        
          192
        
        
        
        
        
        
        
        
          258
        
        
        
        
        
        
        
        
          263
        
        
        
        
        
        
        
        
          924
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Interest expense, net of interest and other income
          
        
        
        
        
           
        
        
          (588
        
        
          )
        
        
        
        
           
        
        
          (550
        
        
          )
        
        
        
        
           
        
        
          (1,173
        
        
          )
        
        
        
        
           
        
        
          (990
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Loss before income taxes
        
        
        
        
        
        
          (396
        
        
          )
        
        
        
        
        
        
          (292
        
        
          )
        
        
        
        
        
        
          (910
        
        
          )
        
        
        
        
        
        
          (66
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax expense
        
        
        
        
           
        
        
          (12
        
        
          )
        
        
        
        
           
        
        
          (12
        
        
          )
        
        
        
        
           
        
        
          (36
        
        
          )
        
        
        
        
           
        
        
          (39
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Loss from continuing operations
        
        
        
        
        
        
          (408
        
        
          )
        
        
        
        
        
        
          (304
        
        
          )
        
        
        
        
        
        
          (946
        
        
          )
        
        
        
        
        
        
          (105
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Discontinued operations:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Loss from discontinued operations
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (487
        
        
          )
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (521
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (408
        
        
          )
        
        
        
        
          $
        
        
          (791
        
        
          )
        
        
        
        
          $
        
        
          (946
        
        
          )
        
        
        
        
          $
        
        
          (626
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Per share data:
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Basic per share amounts (giving 
            effect to the reverse split):
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Continuing operations
        
        
        
        
          $
        
        
          (0.45
        
        
          )
        
        
        
        
          $
        
        
          (0.33
        
        
          )
        
        
        
        
          $
        
        
          (1.05
        
        
          )
        
        
        
        
          $
        
        
          (0.12
        
        
          )
        
      
      
        
          Discontinued operations
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (0.54
        
        
          )
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (0.57
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss per share:
        
        
        
        
          $
        
        
          (0.45
        
        
          )
        
        
        
        
          $
        
        
          (0.87
        
        
          )
        
        
        
        
          $
        
        
          (1.05
        
        
          )
        
        
        
        
          $
        
        
          (0.69
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Weighted average shares outstanding
          
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Diluted per share amounts (giving 
            effect to the reverse split):
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Continuing operations
        
        
        
        
          $
        
        
          (0.45
        
        
          )
        
        
        
        
          $
        
        
          (0.33
        
        
          )
        
        
        
        
          $
        
        
          (1.05
        
        
          )
        
        
        
        
          $
        
        
          (0.12
        
        
          )
        
      
      
        
          Discontinued operations
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (0.54
        
        
          )
        
        
        
        
           
        
        
          ---
        
        
           
        
        
        
        
           
        
        
          (0.57
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net loss per share:
        
        
        
        
          $
        
        
          (0.45
        
        
          )
        
        
        
        
          $
        
        
          (0.87
        
        
          )
        
        
        
        
          $
        
        
          (1.05
        
        
          )
        
        
        
        
          $
        
        
          (0.69
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Weighted average shares outstanding
          
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905
        
        
           
        
        
        
        
           
        
        
          905